Negative Effects of NAFTA and GATT

The broken promises from the GATT and NAFTA trade agreements that Washington approved are beginning to bore holes in the pockets of American consumers and workers.

Some prices of medicines will go up an estimated $6 billion according to a study by scholars at the University of Minnesota. They arrived at this figure by calculating the years that GATT extends patents on more than 100 currently sold prescription drugs. These include widespread drugs such as Zantac for ulcers and Capoten for blood pressure.

By extending monopoly patents of the big companies, the small generic drug companies cannot compete until the patents expire. Generic drug competition almost always markedly reduces prices. Without such competition, consumers and taxpayers would bear the burden.

Senator David Pryor (D-ARK) and five other Senators wrote the head of the Food and Drug Administration (FDA), Dr. David Kessler, on March 27, 1995 urging him to interpret the GATT agreement’s conditions as permitting generic companies to market their drugs. The FDA promised a decision promptly.

The results thus far from NAFTA are also prompt — promptly broken promises by business and governmental boosters of this trade pact. Remember the acrimonious debate in the Congress over NAFTA during the summer and fall of 1993. Well, here is what the boosters promised and what is actually occurring.

U.S. Trade Representative, Mickey Kantor, promised hundreds of thousands of new jobs flowing from larger exports to Mexico. He said that 20,000 new jobs will be created for every $1 billion of gross exports to Mexico. Well, since NAFTA, and especially since the peso devaluation late last year making our exports much more expensive, the U.S. is selling far less to Mexico than Mexico is selling to the U.S. This trade deficit cost 60,000 jobs in the U.S. last year; one can expect an even larger deficit this year.

As of March 1995, the U.S. Labor Department has filings for special NAFTA unemployment assistance from over 46,000 U.S. workers in 426 firms located in 42 states. The worse is coming -­the peso devaluation could cost more than 500,000 U.S. jobs over two years according to a Regional Financial Associates study.

The sharp peso devaluation not only makes Mexican goods cheaper and U.S. goods more expensive in each other’s markets; it also makes Mexican labor much cheaper thereby attracting more U.S. factories to close here and go to Mexico.

NAFTA boosters were quick to say that the trade agreement would bring reduced pollution on the border, less drug trafficking and lower illegal immigration. All this was supposed to come about by growing prosperity in Mexico and closer U.S.–Mexican cooperation on border problems. The reality is that the reverse is the case — there is more pollution, more infectious diseases, more desperate attempts at illegal crossings and greater drug smuggling.

Through economic growth, NAFTA was supposed to bring more stability and democracy to Mexico. Turmoil, rebellion and worsening poverty led to a recent multi-billion dollar U.S. taxpayer-funded bailout of the Mexican government and its rich speculators when the peso collapsed. Mexican unemployment is rising fast and inflation is eating away at the meager family budgets in that unfortunate land.

Revisiting their mistakes from their broken promises is not a common trait of governments. The corporations, of course, could care less if their goal is to relocate south. Companies that are staying here are finding their exports declining. Other firms like the tomato growers in Florida, along with their workers, are facing very tough times.

There will be more such effects from NAFTA and GATT in the coming months.